California neglected to save for a fiery day

Matthew Yi, Chronicle Sacramento Bureau

Published 4:00 am, Friday, July 4, 2008

California spent a record $392 million fighting fires across the state in the fiscal year that ended Monday, burning another hole in the state's already strained finances and forcing officials to dip into shrinking cash reserves to pay firefighting bills.

The amount is by far the highest in the past decade, and it will likely get worse with wildfires in 27 areas of the state already burning early in the fire season.

Gov. Arnold Schwarzenegger has declared emergencies in 11 counties, including Monterey, Santa Cruz and Santa Clara, a necessary move to free up more state funds to fight fires.

"We always will be in a position to aggressively respond to any disaster in California regardless of the cost," said Aaron McLear, a spokesman for the governor.

In the past decade, however, the state has not budgeted enough funds to fight wildfires. In every year but one, the state has had to dip into cash reserves to pay firefighting costs.

"That's what reserves are for," said Assemblyman John Laird, D-Santa Cruz, who chairs the Assembly Budget Committee. "We always make sure that there's enough money for firefighting regardless of what's in the rest of the budget."

But in the just-completed fiscal year, there was a big gap between the actual cost of firefighting and the budgeted amount. The state had set aside just $82 million for such emergencies, forcing it to spend more than $310 million from the state's general fund cash reserves of $858 million.

California will have to continue dipping into its reserves until the Legislature and the governor approve a new budget for the fiscal year that began Tuesday. Budget talks have been contentious, with Schwarzenegger and lawmakers trying to close a $17.2 billion gap that includes $2 billion in reserves for the new fiscal year.

Democratic lawmakers argue that new taxes must be imposed to help balance the budget, while Republicans say the state should cut costs. Schwarzenegger's budget plan doesn't include tax increases although he wants to borrow against future state lottery sales to help bridge the gap.

If a new budget isn't in place in the next few weeks, the state also could face a cash shortage and be forced to take short-term loans that would demand high interest rates and negatively affect the state's credit rating.

Assembly Speaker Karen Bass, D-Baldwin Vista (Los Angeles County), said a shortage of funds to fight wildfires is a good example of why new taxes are needed.

"It's exactly why you can't look at a $15 billion deficit and say that the only way to close that deficit is to cut spending. We need revenues for emergencies just like this."

Bass said she supports Schwarzenegger's proposal for a new fee on commercial and residential real estate insurance policies to generate as much as $125 million a year for fire protection and other natural disasters.

But Assembly Republican Rick Keene from Chico said he opposes the fee proposal, arguing that fire protection is a basic service that the state should cover in its current budget.

"It's something that our government system is already supposed to be paying for and we're asking taxpayers to pay for it?" he said. "We're hoping that our Democratic friends would just stop ringing the bell of raising taxes, raising taxes and raising taxes."

Assemblyman Roger Niello, R-Fair Oaks (Sacramento County), said he is willing to consider a new fee but would limit it to properties in fire-prone areas.

"I think to tax homeowner policies in San Francisco to pay for wildfires elsewhere in the state would be questionable policy."

State's growing tab to fight wildfires

In the past five years, California has under-budgeted funds for fighting wildfires. The 2007-08 figure is an estimate, and the state expects the federal government to pay for some of the costs.